Consumer lending: "Convenient" but "profitable"?

(Baonghean) - The consumer lending market in Nghe An is in its early stages of development and can be said to be a very potential market. Currently, most motorbike, car, and mobile phone dealers offer installment loans to customers to buy products, usually in association with a number of banks or financial companies.

Potential new market

To meet his family's travel needs, in 2014, Mr. Nguyen Anh Ngoc in Ha Huy Tap Ward (Vinh City) decided to buy a car. The car he and his wife chose was a Toyota Vios. However, because the amount of money was not enough, they had to borrow from the bank with flexible interest rates. Mr. Ngoc said: The total value of the car is 650 million VND, but we only have 450 million VND. After being consulted, I chose Tecombank to borrow 200 million VND, with a loan term of 36 months. Up to now, I have paid 70 million VND. In general, the program has created conditions for customers to borrow capital in a timely manner, with quick procedures, meeting shopping needs. Monthly installment payments also help customers accumulate money and save on spending. According to the agreement, in the first 3 months I only have to pay a preferential interest rate of 0.9%/month, equivalent to 10.8%/year, but after that the interest rate is adjusted according to the market.

In the context of not so bright production and business, capital injection is difficult, currently many banks are offering consumer loan programs with attractive interest rates. At Vietcombank, along with loans for production, business, import and export, consumer loans are focused on by this bank. With the characteristics of small loan value, large loan quantity, high profitability... Vietcombank Vinh is accelerating the process of diversifying consumer loan products, targeting many classes of people, satisfying the diverse needs of consumers.

Outstanding personal consumer loans as of September 30, 2015 of Vietcombank Vinh reached 116,314 billion VND. Currently, this bank is offering real estate loans and consumer car loans. In particular, the loan programs for buying social and commercial housing, building and repairing houses, building social housing or the "Peace of mind interest rate" incentive program for personal loan customers are attracting a lot of attention. According to Ms. Le Thi Hue Anh - Director of Joint Stock Commercial Bank for Foreign Trade of Vietnam, Vinh branch, from now until the end of the year, the branch has been approaching apartment projects in the area, coordinating with investors to approach customers who need loans to buy apartment projects, such as Danatol Cua Tien apartment project, Tecco apartment project, Mai Hac De apartment project, etc.

Advise customers on payment methods when buying cars at Toyota Vinh Joint Stock Company.

For VIB Vinh branch, the program "Fulfill your dreams with VIB" is currently being implemented. Accordingly, the program offers customers a preferential loan interest rate of 6.99%/year, along with the opportunity to enjoy a 0% interest rate in the first month and an attractive savings interest rate of 6.5%/year. At the same time, with the criteria of "buy a house, win a car, buy a car, win a house, or win both" of the program; customers who are VIB credit card holders will have thousands of opportunities to receive a 100% refund of the transaction value and cash prizes with a total value of up to 1.2 billion VND. Or at Vietnam Prosperity Bank, VP Bank Vinh branch is also focusing on consumer loans, increasing credit staff access to the market, especially in districts and towns. Currently, this bank's outstanding debt reaches 350 billion VND, of which, consumer loans account for 30 - 40%; In the consumer loan segment, up to 50% are customers borrowing to buy cars.

Borrowing to buy cars and mobile phones in installments is being chosen by many customers and banks are focusing on this form to increase credit growth. Ms. Vo Thi Bich Phuong - Head of Sales Department, Toyota Vinh Joint Stock Company said that since the beginning of the year, Toyota Vinh has achieved sales of 1,500 billion VND. In addition to paying in cash, many banks such as Tienphong Bank, Tecombank... have come to discuss cooperation with the company to create conditions for customers who do not have enough finance to have the opportunity to buy cars in installments. Toyota Vietnam Finance Company also lends money to customers when buying cars of the company with simple procedures, customers only need to notarize photocopies of ID cards and household registration. If in the past, many customers still felt uncomfortable buying cars in installments because the car papers were kept by the bank, now this demand has increased, many people with average income choose it.

Consider installment loans

However, according to many customers, buying goods on installments often has a much higher interest rate than borrowing interest rates on the market. At the mobile store of Pacific Company Limited on Minh Khai Street (Vinh City), Ms. H. in Thanh Linh (Thanh Chuong) came to inquire about buying a mobile phone on installments. Here, an employee of Home Credit Finance Company - a unit associated with Pacific advised that if she buys an Iphone 6 Plus, she must pay 30% of the product value in advance, the remaining amount, with a loan term of 6 months, must be paid 2,967 million VND per month. Ms. H. said: "Calculated, the lowest loan interest rate is up to 2.7%/month.

Banners advertising installment purchases are displayed at many dealer stores.

To get an Iphone 6 Plus, including the down payment, I had to spend a total of 23 million VND, while the original price of this phone was only 18.6 million VND. That's why I decided to save up enough money to buy it instead of buying it in installments." According to the calculation of this finance company's employee, if Ms. H. borrows for 8 months, she will pay 2.396 million VND per month in principal and interest; 10 months is 2.020 million VND/month and if she borrows for 12 months, she will have to pay 1.801 million VND per month. Thus, the monthly payment plus the down payment, the price of the Iphone 6 Plus that the customer has to pay increases from 5 to 8 million VND depending on the loan term, compared to the listed price at the dealer.

Similarly, at a motorbike dealership on Dinh Cong Trang Street, a customer said he planned to borrow from a commercial bank to buy a motorbike because the consumer loan interest rate is from 11-12%/year depending on the loan term, lower than that of joint stock banks or installment loans at dealerships, but the loan procedures are quite complicated. To borrow money, one must prove a stable income or have collateral... so he went to the motorbike dealership, they completed all the loan procedures; but after careful research, the interest rate was very high, so he still hadn't decided...

The consumer lending market in the area is entering a period of fierce competition, as most banks see the benefits of this service. It is not difficult to see banners on many streets advertising sales in the form of installment payments to "attract" customers: the opportunity to own laptops, smartphones, scooters, etc. for only "0 VND". Most agents and stores have employees from banks and financial companies installed to advise customers on installment purchases. With this form of payment, customers can easily meet their shopping needs with quick procedures. However, "customers" should be careful, because if they do not calculate carefully, they will easily "fall into the trap" of borrowing money with sky-high interest rates, comparable to hot loans and black credit loans.

Thu Huyen